Drafting an Australian IP licensing agreement
Licensing agreements govern the commercialisation of IP rights. They must clearly identify the IP, the licence scope, royalties, and the consequences of breach — and must align with the Trade Marks Act, Copyright Act, and Patents Act.
This is an 8-step workflow for drafting an IP licensing agreement under Australian law covering trade marks, copyright, patents, and confidential know-how.
Before you start
- Underlying IP ownership confirmed
- Heads of agreement or term sheet in place
- Commercial scope (territory, field, exclusivity) agreed
- Royalty model identified (flat, running, tiered)
The workflow
Identify the licensed IP
List each registered right (trade mark number, patent number) and describe unregistered rights. Confirm ownership through IP Australia searches where relevant.
Scope of licence
Define the licence scope — exclusive/non-exclusive/sole, territory, field of use, permitted products or services, and whether sub-licensing is allowed.
Royalty mechanics
Draft the royalty clause — fixed fee, running royalty, minimum annual royalty, or combination. Define Net Sales carefully and address withholding tax.
Quality control for trade marks
For trade mark licences, include quality control obligations so the licence qualifies as a permitted use and the registration is not challenged for non-use.
Improvements and derivative IP
Address ownership of improvements, feedback, and derivative works created during the licence. Include grant-back or grant-forward provisions where appropriate.
Infringement and enforcement
Allocate responsibility for monitoring and enforcing the licensed IP against third parties, and cooperation obligations if proceedings are commenced.
Audit, reporting and records
Include reporting obligations, royalty statements, and audit rights. Set retention periods for supporting records.
Termination and run-off
Draft termination rights, run-off for existing stock, and the effect of termination on sub-licences. Finalise governing law, execution, and any CCA notifications.
What you will have at the end
An executed IP licensing agreement that clearly identifies the licensed rights, documents royalty mechanics, and provides for enforcement and termination.
Common issues
- Omitting quality control provisions for trade mark licences
- Vague Net Sales definitions that create royalty disputes
- Not addressing withholding tax for international payments
- Ambiguity over ownership of improvements
- Overlooking CCA and anti-competitive conduct considerations
Run this workflow on a real matter
Quillio drafts the licensing agreement, benchmarks royalty structures, and flags trade mark quality control and CCA issues. See /practice-areas/commercial-lawyers or start a free trial.
This workflow is a general guide. Adapt for the specific IP, industry, and commercial relationship.
Try this workflow with Quillio.
Quillio can run this workflow on a real matter, with citations to current AU authority on every step. The free trial requires no credit card.
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